FASB’s different proposals for financial instrument accounting may impact IFRS requirements

The FASB has published significantly different proposals from the IASB on financial instrument accounting. In its proposed Accounting Standards Update, ‘Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities’, published on 26 May 2010, the FASB sets out its comprehensive approach to financial instruments accounting. This includes classification and measurement, impairment and revisions to hedge accounting. It also proposes extensive new presentation and disclosure requirements.

The more significant difference relates to the classification and measurement approach for financial assets under IFRS 9, ‘Financial instruments,’ which requires amortised cost measurement for certain financial instruments; versus a proposed fair value through ‘other comprehensive income’ (OCI) approach under US GAAP. The IASB has also proposed different impairment and interest recognition models, and is still to finalise its hedge accounting proposal.

The IASB and FASB projects on financial instruments are running concurrently, so the FASB proposals have the potential to impact the IASB’s deliberations on financial instrument impairment and hedge accounting. The IASB has requested that constituents from the IFRS community respond directly to the FASB. I would be interested in your thoughts on these proposals, so please do let me know using the comment facility.